Prescription arose in a UK case dealing with a business interruption claim arising from damage to the insured’s gym facilities when the premises were broken into and vandalised. Damage was caused to the toilets and wash hand basin and there was flooding of the premises. Exercise bikes, furniture, mirrors and other equipment were damaged and various items including computer equipment and audio equipment was stolen.
The summons instituting the action was issued more than 6 years after the date on which the damage occurred in August 2013.
The insurer argued that the claim had prescribed (six years is the relevant statutory prescription period in the United Kingdom).
The policyholder argued that because the greater part of the claim related to business interruption which continued over a twelve month period, the loss extended until August 2014 and therefore the business interruption loss suffered over the period of at least the last six months could be recovered under the policy.
It is also argued that the insurer had made two part payments. One apportioned to the property damage claim and a contribution towards the business interruption claim resulting so the insured argued that there had been interruption of the running of prescription with a fresh accrual of a right of action which meant that the claim was not time barred.
Because the BI policy was not a liability policy, the court held that time began to run from the date of the damage and accordingly clearly the property claim had prescribed. This is not a situation where there is a continuing accrual of the cause of action over the business interruption period.
The cause of action accrues when the business is first interrupted “In consequence of loss or destruction of to property used …. at the Premises for the purpose of the Business.”
The court followed and approved the reasoning of an Australian court’s analysis in finding that additional costs and consequential loss claims are not freestanding causes of action each time a loss of the kind is incurred. Once there is a loss caused by interruption to the business and the insured has not been made good for that loss there is a cause of action available to the insured. The quantum of the amount finally payable need not then be determined or able to be determined.
The alternative argument was because there was a part payment of the claim the effect of the payment was to set time running again. The claim was one properly categorised as being for unliquidated damages. Because the legislation had no application to unliquidated claims or damages it did not assist the claimant.
A South African court is likely to come to the same conclusion in finding that the cause of action accrued due on the date of the damage first occurring.
Under the relevant prescription legislation a South African court may well find however on the appropriate facts that the part payment constituted acknowledgement of liability interrupting prescription alternatively constituting a fresh debt in respect of which the insured had timeously claimed.
The judgment is that of the High Court of Justice in Northern Ireland Queen’s Bench Division Bann Carraig Limited v Great Lakes Reinsurance (UK) Plc [2021] NIQB 63.
